GSI Analysis: Legislators Can Avert Gas Tax Increase Driven by Empty Roads & Lower Gas Prices

MORRISTOWN, NJ – Lower gas prices should be a welcome relief for New Jersey motorists currently facing the prospect of double digit toll increases on the New Jersey Turnpike, Garden State Parkway and Atlantic City Expressway. Instead, should we actually be fearful those lower prices, combined with fewer cars on our roads, will result in a significant increase in the state’s Gas Tax later this year?

That’s the inevitable result, barring immediate action from the Legislature, if current driving trends from the COVID-19 crisis continue for an extended period. According to a comparative analysis by the crowd-sourced traffic site INRIX, passenger vehicle travel in New Jersey on March 24^th was approximately 55% lower than on the same day a month earlier and, despite an increase in consumer demand for supplies, long haul truck travel increased by only 2% in the same period. Naturally, a prolonged decline in motor vehicle traffic, which seems more likely every day, will substantially curb gasoline consumption and with it the collection of gasoline taxes.

So why would that necessitate a gas tax increase? Under the 2016 law that replenished the state’s Transportation Trust Fund (TTF), an annual review of New Jersey’s gas tax rate is required by the State Treasurer. If the Gas Tax doesn’t generate $2 billion a year for the state’s Transportation Trust Fund, which pays for road repairs and mass transit, an increase is required to make up the deficit. A shortfall in revenue resulted in an additional 4 cent increase in 2018, bringing the current tax rate to 41.4 cents per gallon and the diesel fuel tax at 48.4 cents per gallon. (11th highest in the nation)

Although last year an increase in the tax was narrowly averted, driving habits and a sharp decline in economic activity are indicators that we may not be so fortunate in 2020.  And the coincidence of lower gas prices nationally could easily incent commercial traffic to avoid NJ’s higher toll roads for a few pennies more in the cost of fuel from lower taxed states.

“When New Jersey emerges from the COVD-19 pandemic, the last thing that our businesses and residents will need this Fall is another tax increase that will make commuting to work more expensive, justify more surcharges on every transaction, or drive a higher cost to transport goods,” said Garden State Initiative’s president Regina M. Egea.

A simple solution is for the Legislature to amend the existing law now and remove the Treasurer’s unilateral authority to increase the tax based on a pre-set revenue target and return that authority to the peoples’ elected representatives in the Assembly and Senate. If ever New Jersey needed our representatives to consider all the needs of our residents and businesses, it is now as we all need their thoughtful leadership as we navigate this next phase in our state’s history.

Credit: INRIX

The Garden State Initiative is a 501(c)3 nonprofit organization dedicated to strengthening New Jersey by providing an alternative voice and commonsense policy solutions in the state — solutions that promote new investment, the growth of businesses, the creation of economic opportunities, and innovation to the benefit of all New Jerseyans.

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View release online at:  https://www.gardenstateinitiative.org/updates/gas-tax-increase